Buying a new flat with only 83 years on the lease plus negotiations going on re. peppercorn lease

househunter80

Hello - my partner and I are looking to sell our (share of freehold) flat and have found a property which is leasehold with 83 years remaining. We were told to ask the owners about them extending the lease as part of the sale as you have to have lived 2 years in the flat to do this which they have.

However, when asking about this there appears to be a slight spanner in the works. The building is 12 flats which is part of a bigger development of over 100 flats. About 10 years ago, the building where this flat is (the block of 12) broke away from the rest of the development and set up their own management company with the freehold being retained by the owner of all the properties. They are now looking into agreeing a 900yr peppercorn lease so that all the owners of the flats in this building can buy it.

Therefore we are unsure what to do - we were going to request that the lease was extended as part of the sale but this seems to be an on-going project with regards to the share of freehold. We don't want to leave the lease as it is and then move in to discover that we have to pay thousands to buy the lease. We have asked the seller to clarify whether there is a timeline for the peppercorn leases and whether any costs have already been mentioned but they haven't replied which makes us worry that this may be tens of thousands of pounds.

Any advice on what to do or ask at this stage would be much appreciated as we really like the property and would like to make an offer. 

eddddy

What you say sounds a bit confusing. I'd guess that what is happening is:

• The leaseholders set up a 'Right to Manage Company' 10 years ago
• The leaseholders in the block are now negotiating a 'Collective Enfranchisement' - i.e. they are jointly buying the freehold. (Estate Agents often call the result as a 'Share of Freehold' - like your current flat.)
• Once they have bought the freehold, they intend to extend everyone's lease to 900 (or 999) years and reduce ground rents to a peppercorn (zero)

If you want to be one of the joint freeholders (i.e. you want a 'Share of Freehold'), you'd have to pay your share of the cost of the freehold, plus the legal fees, including the fees for varying the lease.

But as you say, there's a possibility that the plan falls through, and the 'collective enfranchisement' doesn't happen - leaving you with an 83 year lease.

But if that happens, you can still wait 2 years and then extend it (as it won't have reached the 'dreaded' 80 year mark). But it could be a problem if you want to sell within the next 2 years.

Or is the situation something different?

Sistergold

The current reality to work with is the fact that the flat has an 83year that’s what you will get if everything else fails. The 83years is tight. 

AdrianC

So there's a freeholder... (owns all the buildings)
...and a headleaseholder... (owns just this building)
...and then there's the ultimate leaseholder (owns just this flat)...

NameUnavailable

The potential of the flat becoming shared freehold is enticing but that's not what you're buying. Until the leaseholders know how much the share of freehold is going to cost and enough of them agree, it's only talk at this stage.

If you want the flat, carry on with your purchase on the basis that it includes an extension of the existing lease.

blue_max_3

NameUnavailable said:

The potential of the flat becoming shared freehold is enticing but that's not what you're buying. Until the leaseholders know how much the share of freehold is going to cost and enough of them agree, it's only talk at this stage.

If you want the flat, carry on with your purchase on the basis that it includes an extension of the existing lease.

I agree with this. You're actually buying a flat with a relatively short lease. I'm not sure the current owner can guarantee anything about the extension, as it's not just their decision, it's the collective decision of the block and it might only take one to drop out to scupper it. I'd wait until you have further clarification before proceeding if I were you.

NameUnavailable

blue_max_3 said:

NameUnavailable said:

The potential of the flat becoming shared freehold is enticing but that's not what you're buying. Until the leaseholders know how much the share of freehold is going to cost and enough of them agree, it's only talk at this stage.

If you want the flat, carry on with your purchase on the basis that it includes an extension of the existing lease.

I agree with this. You're actually buying a flat with a relatively short lease. I'm not sure the current owner can guarantee anything about the extension, as it's not just their decision, it's the collective decision of the block and it might only take one to drop out to scupper it. I'd wait until you have further clarification before proceeding if I were you.

They can extend the existing lease, which the freeholder will charge for. Whether they agree or not is another matter.

It can be done by direct negotiation with the freeholder, or by going down the formal route and having an independent valuation etc. Again, would the vendor want to do this regardless, or wait for another buyer?

If the vendors baulk at paying for the extension they can just serve the required notice on the freeholder and the OP can take that over when they complete, so avoiding the extra 2 years to wait as a new leaseholder, but they will have to pay for the extension and the legal costs for both parties.

I would be worried about paying to extend the lease and then being offered to buy a share of freehold soon after, as it will mean paying twice - if you buy the freehold the lease should be extended at the same time to 999 years (some don't bother doing this and I just can't understand why anyone would want a shared freehold with an 80 year lease as a mortgage company will still be reluctant to lend against it).